FAQ
Selling the practice – buyer AR and valuation prep
A buyer will read your receivables cold, in thirty seconds, with a term sheet in mind. These answers stay on what that pass sees, what to clean before diligence, and which fixes hold in the multiple (the dollars a buyer pays for each dollar of earnings). Light pack on purpose.
What do buyers look at first in my AR?
Receivables first: balance against revenue, the ninety-plus share, and how much is provably collectible. The read takes about thirty seconds and happens before the first meeting. Age alone is not enough. Status is where value hides or dies.
Why isn't my aging report enough for diligence?
An aging report sorts by how long a balance has sat. A buyer sorts by status: paid path, denied and worked, denied and ignored, never ruled, past filing deadline. The aging view blends those together. Status is what moves price.
What should I fix before a buyer pulls my data?
Phantom AR counted as collectible, revenue stuck between stages, attrition the P&L never flagged, and unsigned notes sitting on earned work. The leaks you lived with become line items in their favor. Name them on your clock, not theirs.
Will a quality-of-earnings review catch my cash timing problem?
Quality of earnings tests whether the number is recorded correctly. It often misses whether cash conversion (days from care to usable cash) is healthy. A cash bridge catches timing problems QoE can grade as fine.
What's the honest way to clean AR before a sale?
Separate collectible, disputed, and dead. Work owned lists by cause. Nobody pays you by appearing on a report, and a buyer will not pay for balances that only look alive on aging. Cleanup that holds is status-true, not date-shuffled.
Am I covering shortfalls out of my own pocket in a way a buyer will find?
Owner subsidy hides the cash problem. Quiet top-ups, delayed draws, and personal transfers keep payroll looking fine while the practice stays short. A buyer or banker will name that gap on their terms if you do not name it first.
What does my banker see when cash swings before a sale?
Lenders and buyers both read unexplained swings as risk. AR on the books may already be wrong. If deposits bounce while the schedule looks steady, underwriters see a story you have not told yet – and they price the silence.
Which fixes get priced into the multiple, and which fade?
A one-time backlog cleanup can lift earnings once. Buyers pay multiples for fixes that stay fixed: shorter visit-to-cash that holds, denial causes that stay shut, reporting that keeps working capital honest. Separate one-time cash from structural path changes before you claim either in a CIM.
Where do I start if a sale is on the horizon and AR feels soft?
Run a scorecard that forces bank vs billed vs stuck work onto one page. Then read your AR the way a buyer will.
Related on this hub: AR aging and visit-to-deposit · Back to FAQ hub · Private equity path